How far will the budget ax drop?

JACKSON – Today marks the 34th day of this year’s 90-day regular legislative session, and uncertainty still reigns over how much further the state budget might be cut.
Gov. Haley Barbour has lopped off $458 million from the budget for the current fiscal year, which began July 1. Barbour’s fourth round of budget cuts were made Friday after January’s tax collections were particularly bad in what has been a historically bad year for state tax collections.
Through December, the first six months of the fiscal year, tax collections were about 8 percent below projections, which was historically low. But when it looked as though things could not get any worse, they did.
For January, tax collections were 11.2 percent, or $40.5 million, below projections.
“It is really bad,” said House Appropriations Committee Chair Johnny Stringer, D-Montrose. “I wish we could get some good news for a change.”
Instead, the Legislature is grappling – without much agreement – for ways to deal with all of the bad news.

Taxpayers in limbo
The House has proposed using $100 million of a $500 million reserve fund to offset some of the governor’s cuts, particularly in education.
Senators narrowly rejected that proposal, but have approved a measure to put $58 million back in the budget. The issue of how much of the governor’s cuts to offset – if any – most likely will end up in conference committee where House and Senate leaders will try to reach agreement.
In the meantime, the state’s governmental entities, but more importantly the taxpayers, are left in limbo.
“We have to operate as a worst-case scenario and hope it is not as bad as we anticipate,” said Department of Mental Health Executive Director Ed LeGrand, whose budget has been cut about $19 million.
If funds are restored to the agency, LeGrand said, “We could increase the staff level. Right now I am not comfortable that we have the staff to meet the needs of clients in our programs.”
Budgets have been trimmed across the board. Cuts have come in a fund that reimburses counties for homestead exemption costs and in a fund that allows local governments to lower the price of car tags.
Along with the money taken from education, Stringer said, the cuts “will result in the largest tax increase in the history of the state” by city and county governments on local property owners.
And no matter what happens now, the struggle is expected to continue.
Soon, legislators will begin work on the budget for the upcoming fiscal year, which starts in less than five months.
“I believe next year’s budget will be at least as hard, if not harder,” Barbour said in January during his State of the State speech.
For that reason, Barbour for a long time resisted the use of additional reserve funds for the current fiscal year, opting to make cuts instead.

Layoffs at some point
But last week the Republican governor agreed to draw down an additional $50 million in reserves from the state’s tobacco trust fund. Still, the proposal he endorsed would not mean as much additional money for education as many think is appropriate.
It now appears that large majorities in both the House and Senate favor restoring some of the money cut from education and most likely any compromise will include at least some additional funds for education.
At least one bit of good news for the state from a fiscal standpoint is President Barack Obama’s proposal to continue the enhanced federal Medicaid match for the states. If Congress approves that proposal, Mississippi could save about $114 million during the upcoming fiscal year.
But still the budget issues facing the state are daunting. Almost all agree that state employees will be laid off next fiscal year, if not this one.
The state’s university system already has announced it will be redcuing personnel and raising tuition by more than 6 percent for two consecutive years to deal with budget cuts.
Many of the state’s district attorneys say that sometime in April, they will run out of funds and not be able to pay assistants to prosecute cases.
The $6,000 salary supplement for nationally board certified teachers – long a rallying point for state leaders because of the large number of them compared to other Southern states – is being cut essentially 16 percent during the final six months of the fiscal year unless cuts are restored.
As part of his cuts, Barbour has reduced the reimbursement rate for many health care providers to treat Medicaid patients.
Sen. Gray Tollison, D-Oxford, said many local school districts already are exploring the option of laying off teachers this year. It is unclear whether they can do that since teachers have contracts.
But Tollison said some school districts will have no other options if they lack the money to pay the teachers.

Frustration abounds
Senate Appropriations Chair Alan Nunnelee, R-Tupelo, said many families are facing the same issues.
“It does get frustrating,” Nunnelee said. “But families are frustrated and are having to cut back. Doctors and lawyers are seeing their income dip. Businesses have less revenue and are facing many of the same frustrations.”
Sen. Hob Bryan, D-Amory, said talk of laying off state employees and possibly teachers is only exasperating what already is a bad economic situation in the state.
“It makes no economic sense to have all the funds in reserve and not let them be spent,” Bryan said. “It is almost as if we are guaranteeing there will be layoffs now instead of the possibility of layoffs in the future.”
Bryan said the economy eventually will turn around and revenue collections will improve. It would happen sooner, he predicted, if 30,000 state employees and about that many teachers were not so worried about layoffs that they quit spending.
But Nunnelee said the state has reserve funds only because he, Barbour and other Republicans have fought in recent years to keep them from being spent in previous tough budget times.
He said it is prudent to stay on the course he and the governor agreed to last year on how to spend the funds.
“The decisions are difficult because they are very emotional,” Nunnelee said. “But it is all about adding up columns of debits and credits. We simply can’t spend more money than we take in.”